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campbell clark

One of Canada's global champions has just given itself a beating.

Canadian officials often pointed to SNC-Lavalin's business abroad as an example of this country's trade inroads. It's taking over the sale of CANDU nuclear equipment. Foreign Minister John Baird brought an SNC exec, Bruno Picard, to meet Libya's new leaders last fall.

The company's status makes the murky affair they reported this week a black eye for Canadian business. Worse, the questions it raises – about whether money made it to the hands of a foreign official – underlines a weakness. Canada has a poor reputation for tackling bribery.

There's no evidence that happened in SNC-Lavalin's case. Its board reported two mysterious payments, totalling $56-million, supposedly for foreign agents. They don't really know where it went. They don't think they were related to Libya, but one payment was made by its unit in Tunisia, during the rule of dictator Zine El Abidine Ben Ali.

Senior SNC officials refused to sign off, but CEO Pierre Duhaime, who stepped down this week, allowed one, and another went ahead without approval, the board said. They were recorded as related to certain projects, but were really for others. So far, there's evidence of a governance problem, not bribery.

It might be left for the RCMP to figure out. But it should still be ringing warning bells. It's time to tighten the rules. The United States has aggressively prosecuted bribery; Britain has a new, tougher law. They want Canada to act, too.

In the United States, big companies have an incentive to conduct due diligence on agents they hire abroad to drum up business. They could be prosecuted for a bribe if they're not looking for the red flags.

Unusually lucrative and vague contracts for agents are a red flag. "The great majority of cases involve a third-party agent," said Alexandra Wrage, a Canadian who heads anti-bribery non-profit TRACE International.

Canada doesn't have the same diligence standard. The Organization for Economic Co-operation and Development criticized Canada, most recently in 2011, for inadequate laws and enforcement.

Why should we care? Canadian companies do business in places where bribes are demanded, and some competitors pay them.

But bribery skews the market. It often rips off the poorest. And for a country that promotes democracy, it's important to remember that corruption has a symbiotic relationship with repression. It flourishes in authoritarian places where officials can make arbitrary decisions and demand rent for them. Bribes are an incentive to use repression to stay in power, and pay the clique that aids it.

Canada signed an OECD covenant to attack bribery in 1997, but has been criticized since. The first real prosecution, against Niko Resources for giving a Bangladeshi official a $190,000 vehicle, led to a $9.5-million fine last year. Aside from that, there's been one minor conviction, and one charge.

There's been progress, said James Klotz, president of Transparency International Canada and a lawyer at Miller Thomson. The RCMP created an anti-corruption unit in 2008 and 34 investigations are under way. But last year, the OECD criticized Canada for not dedicating prosecutors to such cases.

The law needs work. Canada's law applies to bribes linked to Canadian territory, which can be hard to prove. The OECD says it should apply to bribes paid by Canadians anywhere. A bill to make that change died when Parliament was prorogued in 2010 and should be revived.

Companies that get convicted should be cut off by Ottawa from contracts and export loans. Provinces should, like the United States, set easier-to-prosecute civil fines for falsely recording a bribe on the books. A voluntary disclosure program, so companies who report past bribes get lesser penalties, is wise, Mr. Klotz said. The point is to change behaviour.

"What we really want is for companies to understand that there's a consequence for doing this," he said.

Campbell Clark writes about foreign affairs from Ottawa